United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Item 2.02 Results of Operations and Financial Condition
On March 10, 2022, Cadre Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the forth quarter and full year ended December 31, 2021. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The press release contains the non-GAAP measures: (i) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), (ii) adjusted EBITDA, (iii) adjusted EBITDA margin, and (iv) adjusted EBITDA conversion rate. The Company believes that the presentation of these non-GAAP measures provides useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, and thereby enhances the user's overall understanding of the Company's current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future earnings expectations. The non-GAAP measures are reconciled to comparable GAAP financial measures within the Press Release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.
The information in Item 2.02 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 attached hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
Exhibit | Description | |
|
|
|
99.1 |
| |
99.2 |
| Slide Presentation for Conference Call held on March 10, 2022 (furnished only). |
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: March 10, 2022
| CADRE HOLDINGS, INC. | |
|
| |
|
| |
| By: | /s/ Blaine Browers |
|
| Name:Blaine Brower |
|
| Title:Chief Financial Officer |
Exhibit 99.1
Cadre Holdings Reports Fourth Quarter 2021 Financial Results
Generated Record Full Year Net Sales and Adjusted EBITDA; Expanded Gross Profit Margin and Adjusted EBITDA Margin
Completed Acquisition of Well-Established European Duty Gear Brand to Grow International Presence
Expects Full Year 2022 Net Sales of $434.0 to $441.0 million and adjusted EBITDA of $70.0 to $75.5 million
JACKSONVILLE, Fla., March 10, 2022 – Cadre Holdings, Inc. (NYSE: CDRE) ("Cadre" or "the Company"), a global leader in the manufacturing and distribution of safety and survivability equipment for first responders, announced today its consolidated operating results for the quarter and year ended December 31, 2021.
Fourth Quarter and Year Ended 2021 Highlights
| ● | Net sales of $103.5 million for the fourth quarter; net sales of $427.3 million for the year ended December 31, 2021 |
| ● | Gross profit margin of 37.9% for the fourth quarter; gross profit margin of 39.9% for the year ended December 31, 2021 |
| ● | Net income of $4.3 million, or $0.13 per share, for the fourth quarter; net income of $12.7 million, or $0.44 per share, for the year ended December 31, 2021. |
| ● | Adjusted EBITDA of $15.3 million for the fourth quarter; Adjusted EBITDA of $71.4 million for the year ended December 31, 2021 |
| ● | Adjusted EBITDA margin of 14.7% for the fourth quarter; Adjusted EBITDA margin of 16.7% for the year ended December 31, 2021 |
| ● | Declared quarterly cash dividend of $0.08 per share in January 2022 |
“2021 was a momentous year for Cadre, as we successfully completed our IPO and capitalized on our leading positions in mission critical first responder end markets with attractive long-term tailwinds and recurring demand,” said Warren Kanders, CEO and Chairman. “Our financial results demonstrate our entrenched positions in these large and growing markets, strong operating cash flow generation and intense focus on margin expansion. In addition to record full year net sales and adjusted EBITDA, our 2021 year-over-year gross profit and Adjusted EBITDA margins improved by 210 and 240 basis points, respectively. For the fourth quarter, the resilience of Cadre’s operating model was evident, highlighted by our continued margin improvement.”
Mr. Kanders continued, “A key component of Cadre’s strategy to unlock long-term value is our targeted M&A program, which has proven exceptionally successful over our 55-year history. Consistent with this approach, and immediately following our public offering, we are pleased to have taken advantage of an accretive opportunity for the benefit of shareholders. Our acquisition of a well-established duty gear brand with leading market shares, further expands our international presence and provides Cadre another European foothold to diversify our global footprint and add multiple growth avenues. We continue to actively evaluate additional acquisition opportunities within our robust pipeline, while also maintaining a strong position to continue to drive profitable organic growth via new product development and geographic expansion.”
Fourth Quarter and Year Ended 2021 Operating Results
For the quarter ended December 31, 2021, Cadre generated net sales of $103.5 million, as compared to $107.6 million for the quarter ended December 31, 2020.
For the year ended December 31, 2021, Cadre generated net sales of $427.3 million, as compared to $404.6 million for the year ended December 31, 2020.
For the quarter ended December 31, 2021, Cadre generated gross profit of $39.2 million, as compared to $39.8 million for the prior year period. For the year ended December 31, 2021, Cadre generated gross profit of $170.7 million, as compared to $152.9 million for the prior year period.
Gross profit margin was 37.9% for the quarter ended December 31, 2021, as compared to 37.0% for the prior year period, mainly driven by favorable pricing and product mix.
Gross profit margin was 39.9% for the year ended December 31, 2021, as compared to 37.8% for the prior year period, mainly driven by favorable pricing and product mix.
Net income was $4.3 million for the quarter ended December 31, 2021, as compared to net income of $15.8 million for the quarter ended December 31, 2020, primarily as a result of an increase in provision for income taxes due to the release of a valuation allowance on a portion of the Company’s deferred tax assets in December 2020, offset in part by a reduction in interest expense as a result of the Company’s August 2021 debt refinance for the year ended December 31, 2021.
Net income was $12.7 million for the year ended December 31, 2021, as compared to $38.5 million for the year ended December 31, 2020, primarily as a result of a loss on extinguishment of debt incurred from the execution of the New Credit Agreement, an increase in provision for income taxes due to the release of a valuation allowance on a portion of the Company’s deferred tax assets in December 2020 and the following non-recurring transactions recognized in the period ended December 31, 2020: a gain on the sale of a long-lived asset and receipt of earn-out stock payments. These were offset by improvements in gross profit due to increased sales, favorable pricing and product mix.
Cadre generated $15.3 million of Adjusted EBITDA for the quarter ended December 31, 2021, as compared to $15.5 million for the quarter ended December 31, 2020. Adjusted EBITDA margin was 14.7% for the quarter ended December 31, 2021, as compared to 14.4% for the prior year period.
Cadre generated $71.4 million of Adjusted EBITDA for the year ended December 31, 2021, as compared to $58.0 million for the prior year period. Adjusted EBITDA margin was 16.7% for the year ended December 31, 2021, as compared to 14.3% for the prior year period.
Product segment gross margin was 38.8% for the fourth quarter and 40.9% for the year ended December 31, 2021.
Distribution segment gross margin was 23.9% for the fourth quarter and 24.9% for the year ended December 31, 2021.
Liquidity, Cash Flows and Capital Allocation
Cadre’s cash and cash equivalents increased by $31.0 million from $2.9 million as of December 31, 2020, to $33.9 million as of December 31, 2021. Capital expenditures totaled $0.8 million for the fourth quarter and $3.0 million for the year ended December 31, 2021, compared with $0.8 million for the fourth quarter and $4.7 million for the year ended December 31, 2020. Net debt decreased by $53.1 million from $212.8 million as of December 31, 2020, to $159.7 million as of December 31, 2021.
On November 3, 2021, the Company completed the closing of its initial public offering of 6.9 million shares, including the full exercise of the underwriters’ option, at a price to the public of $13.00 per share, for net proceeds of approximately $78.6 million.
On November 9, 2021, the Company utilized proceeds received in connection with the initial public offering and repaid $38.9 million and $20.5 million, respectively, of borrowings outstanding under its current term loan and revolving credit facility.
Acquisition of Radar Leather Division S.r.l.
On January 11, 2022, Cadre announced the completion of its accretive acquisition of Radar Leather Division S.r.l. (“Radar”). Established in 1957 by Gisberto Pellegrini and based in Fucecchio, Italy, Radar is a premiere family-owned duty gear business that specializes in the production of high-quality holsters, belts, duty belts, and other accessories.
Radar generates the majority of its revenue in Europe, selling its products through distribution partners and directly to agencies.
Dividend
On January 25, 2022, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.08 per share, or $0.32 per share on an annualized basis. Cadre's dividend payment was made on February 17, 2022, to shareholders of record as of the close of business on the record date of February 4, 2022. The declaration of any future dividend is subject to the discretion of the Company's Board of Directors.
2022 Outlook
Cadre expects to generate net sales in 2022 of between $434.0 million and $441.0 million and adjusted EBITDA in 2022 of between $70.0 million and $75.5 million. Cadre expects adjusted EBITDA conversion in the range of 92-95% for the full year.
Conference Call
Cadre management will host a conference call on Thursday, March 10, 2022, at 5:00 PM ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the US is (844)-200-6205 and the dial-in number for international callers is (929)-526-1599. The access code for all callers is 585570. A live webcast will also be available on the Company’s website at https://www.cadre-holdings.com/.
A replay of the call will be available through March 16, 2022. To access the replay, please dial (866)-813-9403 in the U.S. or (929)-458-6194 if outside the U.S., and then enter the access code 247139.
About Cadre
Headquartered in Jacksonville, Florida, Cadre is a global leader in the manufacturing and distribution of safety and survivability products for first responders. Cadre's equipment provides critical protection to allow users to safely and securely perform their duties and protect those around them in hazardous or life-threatening situations. The Company's core products include body armor, explosive ordnance disposal equipment, and duty gear. Our highly engineered products are utilized in over 100 countries by federal, state and local law enforcement, fire and rescue professionals, explosive ordnance disposal teams, and emergency medical technicians. Our key brands include Safariland® and Med-Eng®, amongst others.
Use of Non-GAAP Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). This press release contains the non-GAAP measures: (i) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), (ii) adjusted EBITDA, (iii) adjusted EBITDA margin, and (iv) adjusted EBITDA conversion rate. The Company believes the presentation of these non-GAAP measures provides useful information for the understanding of its ongoing operations and enables investors to focus on period- over-period operating performance, and thereby enhances the user’s overall understanding of the Company’s current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future earnings expectations. Non-GAAP measures are reconciled to comparable GAAP financial measures within this press release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.
Forward-Looking Statements
Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward-looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any
number of factors could cause actual results to differ materially from projections or forward-looking statements, including without limitation global economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in in the markets in which we operate, including foreign countries. More information on potential factors that could affect the Company’s financial results are more fully described from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.
Contact:
Gray Hudkins
Cadre Holdings, Inc.
203-550-7148
Investor Relations:
The IGB Group
Leon Berman / Matt Berkowitz
212-477-8438 / 212-227-7098
[email protected] / [email protected]
Media Contact:
Jonathan Keehner / Andrew Siegel
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
CADRE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
|
| December 31, | ||||
| | 2021 |
| 2020 | ||
Assets |
| |
|
| |
|
Current assets |
| |
|
| |
|
Cash and cash equivalents | | $ | 33,857 | | $ | 2,873 |
Accounts receivable, net | | | 48,344 | | | 43,646 |
Inventories | |
| 63,978 | |
| 60,923 |
Prepaid expenses | |
| 10,353 | |
| 6,665 |
Other current assets | |
| 3,171 | |
| 3,362 |
Assets held for sale | |
| 278 | |
| — |
| | | | | | |
Total current assets | |
| 159,981 | |
| 117,469 |
| | | | | | |
Property and equipment, net | | | 33,053 | | | 35,437 |
Deferred tax assets, net | |
| 7,059 | |
| 12,900 |
Intangible assets, net | |
| 42,415 | |
| 51,009 |
Goodwill | |
| 66,262 | |
| 66,314 |
Other assets | |
| 3,026 | |
| 150 |
| | | | | | |
Total assets | | $ | 311,796 | | $ | 283,279 |
| | | | | | |
Liabilities, Mezzanine Equity and Shareholders' Equity | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Accounts payable | | $ | 19,328 | | $ | 21,978 |
Accrued liabilities | |
| 40,736 | |
| 36,004 |
Income tax payable | |
| 1,255 | |
| 1,005 |
Liabilities held for sale | | | 128 | | | |
Current portion of long-term debt | |
| 13,174 | |
| 3,496 |
| | | | | | |
Total current liabilities | |
| 74,621 | |
| 62,483 |
| | | | | | |
Long-term debt | |
| 146,516 | |
| 209,310 |
Deferred tax liabilities | |
| 1,297 | |
| 2,085 |
Other liabilities | |
| 722 | |
| 550 |
| | | | | | |
Total liabilities | |
| 223,156 | |
| 274,428 |
| | | | | | |
Mezzanine equity | |
| | |
|
|
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021 and December 31, 2020) | |
| — | |
| — |
| | | | | | |
Shareholders' equity | |
| | |
|
|
Common stock ($0.0001 par value, 190,000,000 shares authorized, 34,383,350 shares and 27,483,350 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively) | |
| 3 | |
| 3 |
Additional paid-in capital | |
| 127,606 | |
| 48,670 |
Accumulated other comprehensive loss | |
| (1,917) | |
| (2,860) |
Accumulated deficit | |
| (37,052) | |
| (36,962) |
| | | | | | |
Total shareholders’ equity | |
| 88,640 | |
| 8,851 |
| | | | | | |
Total liabilities, mezzanine equity and shareholders' equity | | $ | 311,796 | | $ | 283,279 |
CADRE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share amounts)
| | Three Months Ended December 31, | | Year Ended December 31, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Net sales | | $ | 103,537 | | $ | 107,623 | | $ | 427,288 | | $ | 404,642 |
Cost of goods sold | |
| 64,342 | |
| 67,835 | |
| 256,598 | |
| 251,704 |
Gross profit | |
| 39,195 | |
| 39,788 | |
| 170,690 | |
| 152,938 |
Operating expenses | |
|
| |
|
| |
|
| |
|
|
Selling, general and administrative | |
| 27,794 | |
| 26,664 | |
| 114,962 | |
| 106,627 |
Restructuring and transaction costs | |
| 1,939 | |
| 2,679 | |
| 3,430 | |
| 5,822 |
Related party expense | |
| 142 | |
| 1,155 | |
| 579 | |
| 1,635 |
Other general expense (income) | |
| — | |
| — | |
| — | |
| (10,950) |
Total operating expenses | |
| 29,875 | |
| 30,498 | |
| 118,971 | |
| 103,134 |
Operating income | |
| 9,320 | |
| 9,290 | |
| 51,719 | |
| 49,804 |
Other expense | |
|
| |
|
| |
|
| |
|
|
Interest expense | |
| (2,296) | |
| (6,113) | |
| (16,425) | |
| (24,388) |
Loss on extinguishment of debt | |
| — | |
| (200) | |
| (15,155) | |
| (200) |
Other (expense) income, net | |
| (66) | |
| 734 | |
| (947) | |
| 2,659 |
Total other expense, net | |
| (2,362) | |
| (5,579) | |
| (32,527) | |
| (21,929) |
Income before provision for income taxes | |
| 6,958 | |
| 3,711 | |
| 19,192 | |
| 27,875 |
(Provision) benefit for income taxes | |
| (2,670) | |
| 12,069 | |
| (6,531) | |
| 10,578 |
Net income | | $ | 4,288 | | $ | 15,780 | | $ | 12,661 | | $ | 38,453 |
Net income per share: | |
|
| |
|
| |
|
| |
|
|
Basic | | $ | 0.13 | | $ | 0.57 | | $ | 0.44 | | $ | 1.40 |
Diluted | | $ | 0.13 | | $ | 0.57 | | $ | 0.44 | | $ | 1.40 |
Weighted average shares outstanding: | |
|
| |
|
| |
|
| |
|
|
Basic | |
| 31,908,350 | |
| 27,483,350 | |
| 28,598,692 | |
| 27,483,350 |
Diluted | |
| 31,908,350 | |
| 27,483,350 | |
| 28,598,692 | |
| 27,483,350 |
CADRE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| | Year Ended December 31, | ||||
|
| 2021 |
| 2020 | ||
Cash Flows From Operating Activities: |
| |
|
| |
|
Net income | | $ | 12,661 | | $ | 38,453 |
Adjustments to reconcile net income to net cash provided by operating activities: | |
|
| |
|
|
Depreciation and amortization | |
| 13,718 | |
| 14,733 |
Amortization of original issue discount and debt issue costs | |
| 3,193 | |
| 2,216 |
Loss on extinguishment of debt | |
| 15,155 | |
| 200 |
Non-cash consideration received from sale of business | |
| — | |
| (9,197) |
Deferred income taxes | |
| 4,772 | |
| (12,248) |
Stock-based compensation | | | 355 | | | — |
Gain on sale of fixed assets | |
| — | |
| (6,240) |
Gain on settlement of contingent consideration | | | — | | | (1,427) |
Loss on settlement of equity securities | | | — | | | 2,288 |
Provision for losses on accounts receivable | |
| (188) | |
| 177 |
Foreign exchange loss (gain) | |
| 102 | |
| (940) |
Changes in operating assets and liabilities: | |
|
| |
|
|
Accounts receivable | |
| (4,641) | |
| 11,811 |
Inventories | |
| (3,189) | |
| 1,639 |
Prepaid expenses and other assets | |
| (4,564) | |
| 1,837 |
Accounts payable and other liabilities | |
| 2,720 | |
| 2,117 |
Net cash provided by operating activities | |
| 40,094 | |
| 45,419 |
| | | | | | |
Cash Flows From Investing Activities: | |
|
| |
|
|
Purchase of property and equipment | |
| (2,832) | |
| (4,708) |
Proceeds from disposition of property and equipment | |
| — | |
| 12,408 |
Proceeds from sale of equity securities | |
| — | |
| 14,372 |
Payments on settlement of equity securities | |
| — | |
| (2,288) |
Net cash (used in) provided by investing activities | |
| (2,832) | |
| 19,784 |
| | | | | | |
Cash Flows From Financing Activities: | |
|
| |
|
|
Proceeds from revolving credit facilities | |
| 257,980 | |
| 382,056 |
Principal payments on revolving credit facilities | |
| (258,612) | |
| (384,215) |
Proceeds from term loans | |
| 198,716 | |
| 219,586 |
Principal payments on term loans | |
| (266,000) | |
| (276,444) |
Proceeds from insurance premium financing | |
| 5,010 | |
| 2,733 |
Principal payments on insurance premium financing | |
| (3,061) | |
| (2,897) |
Payment of capital leases | |
| (43) | |
| (43) |
Payment of contingent consideration | | | — | | | (240) |
Payment of debt modification costs | | | — | | | (5,438) |
Payments for debt issuance costs | |
| (2,198) | |
| — |
Payments on extinguishment of debt | |
| (4,217) | |
| — |
Proceeds from initial public offering, net of underwriter discounts | | | 83,421 | | | — |
Deferred offering cost payments | | | (4,841) | | | — |
Dividends distributed | |
| (12,751) | |
| — |
Net cash used in financing activities | |
| (6,596) | |
| (64,902) |
Effect of foreign exchange rates on cash and cash equivalents | |
| 318 | |
| 52 |
Change in cash and cash equivalents | |
| 30,984 | |
| 353 |
Cash and cash equivalents, beginning of period | |
| 2,873 | |
| 2,520 |
Cash and cash equivalents, end of period | | $ | 33,857 | | $ | 2,873 |
CADRE HOLDINGS, INC.
SEGMENT INFORMATION
(Unaudited)
(In thousands)
|
| Three months ended December 31, 2021 | ||||||||||
| | | | | | | | Reconciling | | | | |
|
| Products | | Distribution | | Items(1) |
| Total | ||||
Net sales |
| $ | 88,150 |
| $ | 20,957 |
| $ | (5,570) |
| $ | 103,537 |
Cost of goods sold | | | 53,957 | | | 15,953 | | | (5,568) | | | 64,342 |
Gross profit | | $ | 34,193 | | $ | 5,004 | | $ | (2) | | $ | 39,195 |
|
| Three months ended December 31, 2020 | ||||||||||
| | | | | | | | Reconciling | | | | |
|
| Products |
| Distribution |
| Items(1) |
| Total | ||||
Net sales |
| $ | 92,248 |
| $ | 22,215 |
| $ | (6,840) |
| $ | 107,623 |
Cost of goods sold | | | 57,815 | | | 16,864 | | | (6,844) | | | 67,835 |
Gross profit | | $ | 34,433 | | $ | 5,351 | | $ | 4 | | $ | 39,788 |
|
| Year ended December 31, 2021 | ||||||||||
| | | | | | | | Reconciling | | | | |
|
| Products |
| Distribution |
| Items(1) |
| Total | ||||
Net sales |
| $ | 362,189 |
| $ | 90,043 |
| $ | (24,944) |
| $ | 427,288 |
Cost of goods sold | | | 213,881 | | | 67,649 | | | (24,932) | | | 256,598 |
Gross profit | | $ | 148,308 | | $ | 22,394 | | $ | (12) | | $ | 170,690 |
|
| Year ended December 31, 2020 | ||||||||||
| | | | | | | | Reconciling | | | | |
|
| Products |
| Distribution |
| Items(1) |
| Total | ||||
Net sales |
| $ | 343,689 |
| $ | 84,922 |
| $ | (23,969) |
| $ | 404,642 |
Cost of goods sold | | | 211,048 | | | 64,761 | | | (24,105) | | | 251,704 |
Gross profit | | $ | 132,641 | | $ | 20,161 | | $ | 136 | | $ | 152,938 |
| (1) | Reconciling items consist primarily of intercompany eliminations and items not directly attributable to operating segments. |
CADRE HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
| | Three Months Ended December 31, | | Year Ended December 31, |
| |||||||||||
| | 2021 | | 2020 | | 2021 | | 2020 | | 2019 |
| |||||
Net income | | $ | 4,288 | | $ | 15,780 | | $ | 12,661 | | $ | 38,453 | | $ | (1,928) | |
Add back: | |
|
| |
|
| |
|
| |
|
| |
|
| |
Depreciation and amortization | |
| 3,292 | |
| 3,526 | |
| 13,718 | |
| 14,733 | |
| 15,443 | |
Interest expense | |
| 2,296 | |
| 6,113 | |
| 16,425 | |
| 24,388 | |
| 29,848 | |
Provision (benefit) for income taxes | |
| 2,670 | |
| (12,069) | |
| 6,531 | |
| (10,578) | |
| (142) | |
EBITDA | | $ | 12,546 | | $ | 13,350 | | $ | 49,335 | | $ | 66,996 | | $ | 43,221 | |
Add back: | |
|
| |
|
| |
|
| |
|
| |
|
| |
Restructuring and transaction costs(1) | |
| 1,939 | |
| 2,679 | |
| 3,430 | |
| 5,822 | |
| 918 | |
Other general expense (income)(2) | |
| — | |
| — | |
| — | |
| (10,950) | |
| (7,630) | |
Loss on extinguishment of debt(3) | |
| — | |
| 200 | |
| 15,155 | |
| 200 | |
| — | |
Other expense (income), net(4) | |
| 66 | |
| (734) | |
| 947 | |
| (2,659) | |
| (395) | |
Contingent consideration(5) | |
| — | |
| — | |
| — | |
| (1,427) | |
| — | |
Stock-based compensation expense(6) | | | 355 | | | — | | | 355 | | | — | | | — | |
LTIP bonus(7) | |
| 358 | |
| — | |
| 2,162 | |
| — | |
| — | |
Goodwill impairment(8) | | | — | | | — | | | — | | | — | | | 7,585 | |
Adjusted EBITDA | | $ | 15,264 | | $ | 15,495 | | $ | 71,384 | | $ | 57,982 | | $ | 43,699 | |
Less: Capital expenditures | |
| (804) | |
| (795) | |
| (3,029) | |
| (4,708) | |
| (3,082) | |
Adjusted EBITDA less capital expenditures | | $ | 14,460 | | $ | 14,700 | | $ | 68,355 | | $ | 53,274 | | $ | 40,617 | |
Adjusted EBITDA conversion rate(9) | |
| 95 | % |
| 95 | % |
| 96 | % |
| 92 | % |
| 93 | % |
Adjusted EBITDA margin(10) | |
| 14.7 | % |
| 14.4 | % |
| 16.7 | % |
| 14.3 | % |
| 10.8 | % |
| (1) | Reflects the “Restructuring and transaction costs” line item on our consolidated statement of operations, which for 2021 and 2020 primarily includes transaction costs composed of legal and consulting fees compared to 2019, which is primarilyincludes termination benefits and relocation of employees associated with consolidatoing or closing of facilities. |
| (2) | Reflects the “Other general expense (income)” line item on our consolidated statement of operations and includes a gain from a long-lived asset sale as well as earn-out stock payments for the year ended December 31, 2020 and a gain from the sale of Mustang in addition to earn-out stock payments for the year ended December 31, 2019. |
| (3) | Reflects losses incurred in connection with the August 2021 and November 2020 debt refinances. |
| (4) | Reflects the “Other (expense) income, net” line item on our consolidated statement of operations. For the three months and year ended December 31, 2021, other (expense) income, net primarily includes losses on foreign currency transactions. For the three months and year ended December 31, 2020, other (expense) income, net primarily includes gains on foreign exchange transactions and unrealized gains on an investment in equity securities. For the year ended December 31, 2019, other (expense) income, net primarily includes unrealized gains on equity securities offset by losses on foreign currency transactions. |
| (5) | Reflects a gain on the settlement of contingent consideration. |
| (6) | Reflect stock-based compensation expense recognized in the respective periods. |
| (7) | Reflects the cost of a cash-based long-term incentive plan awarded to employees that vests over three years. |
| (8) | Reflects goodwill impairment expense relating to our Distribution reporting unit. |
| (9) | Reflects (Adjusted EBITDA less capital expenditures) / Adjusted EBITDA. |
| (10) | Reflects Adjusted EBITDA / Net sales for the relevant periods. |
Exhibit 99.2
FOURTH QUARTER 2021 |
2 FORWARD - LOOKING STATEMENTS Except for historical information, certain matters discussed in this presentation may be forward - looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward - looking statements include but are not limited to all projections and anticipated levels of future performance. Forward - looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward - looking statements, including without limitation global economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in in the markets in which we operate, including foreign countries. More information on potential factors that could affect the Company’s financial results are more fully described from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10 - K, Quarterly Reports on Form 10 - Q, and Current Reports on Form 8 - K. All forward - looking statements included in this presentation are based upon information available to the Company as of the date of this presentation, and speak only as of the date hereof. We assume no obligation to update any forward - looking statements to reflect events or circumstances after the date of this presentation .. 2 |
TODAY’S PRESENTERS 3 BRAD WILLIAMS President BLAINE BROWERS Chief Financial Officer WARREN KANDERS Chief Executive Officer and Chairman of the Board |
4 AGENDA • Q4 and FY21 Highlights • Business Overview • Financial Summary • 2022 Outlook • Conclusion and Q&A |
1. Includes $15.2 million loss on extinguishment of debt 2. Includes $12.5 million gain due to earn - out and long - lived asset sale FOURTH QUARTER AND FULL YEAR 2021 HIGHLIGHTS 5 Q4 2021 Q4 2020 FY 2021 FY 2020 NET SALES $103.5M $107.6M $427.3M $404.6M GROSS MARGIN 37.9% 37.0% 39.9% 37.8% NET INCOME $4.3M / $0.13 per share $15.8M / $0.57 per share $12.7M 1 / $0.44 per share $38.5M 2 / $1.40 per share ADJUSTED EBITDA $15.3M $15.5M $71.4M $58.0M ADJUSTED EBITDA MARGIN 14.7% 14.4% 16.7% 14.3% • Declared quarterly cash dividend of $0.08 per share in January 2022 • Completed immediately accretive acquisition of Radar Leather Division S.r.l .. |
STRATEGIC OBJECTIVES 6 Achieve Organic Revenue Growth Pursue M&A Opportunities Continuously Improve Gross and Adj. EBITDA Margins |
7 MACRO TAILWINDS SUPPORT LONG TERM SUSTAINABLE GROWTH OPPORTUNITY Source: NATO. Not shown: Canada and Iceland also under 2% GPD Target 20 NATO Countries Spend less than 2% of GDP Target on Defense and Security Chancellor Scholz said ”it is clear we need to invest significantly more in the security of our country” increasing defense budget from €53 billion to €100 billion. G ERMANY 2021 Homicide Rates 44% Higher than in 2019 (1) President Biden said “So let’s not abandon our streets…the American Rescue Plan provided $350 billion…to hire more police…the answer is FUND the police: 2022 S TATE OF THE U NION A DDRESS Source: Council on Criminal Justice. “Historic times call for historic decisions,” PM Frederiksen commented, adding “this is the largest investment in Danish defense in recent times” announcing plan to increase spending gradually by 50% over a decade. D ENMARK |
8 20 20 13 CADRE'S KEY M&A CRITERIA Niche market No large - cap competition Leading market share Cost structure where material > labor Leading and defensible technology High cost of substitution Mission - critical to customer Recurring revenue profile Asset - light Business Financial Market Strong brand recognition Attractive ROIC Resiliency through market cycles CADRE'S KEY M&A CRITERIA 8 |
9 21 21 60+ years history as a leading brand in designing and development of engineered holsters and hunting accessories KEY M&A CRITERIA MET ACQUISITION OF RADAR LEATHER DIVISION S.r.l .. #1 or #2 market position Mission - critical to customer Strong brand recognition Asset light Attractive ROIC Resiliency thru market cycles INTEGRATION – TOP PRIORITIES • Functional teams working on first 100 - day basics • Manufacturing teams evaluating localization in detail • Supply chain teams diving into leverage points • Product managers joined together handling positioning Expands reach of holsters into the EU and adds to Cadre’s international footprint in the UK and Lithuania to support growing international customer base 9 |
10 $140.1 $152.9 $170.7 $5.9 2019 2020 2021 RECORD NET SALES AND GROSS PROFIT NET SALES AND GROWTH PROFILE ($MM) GROSS PROFIT ($MM) $401.9 $404.6 $427.3 $18.8 2019 2020 2021 $420.7 Gross Margin 34.7% 37.8% 39.9% $146.0 Net Sales / Gross Profit Financial Contribution from Mustang Survival Holdings Divested in 2019A % CAGR 0.8 % % Y/Y GROWTH 5.6 % % CAGR 8.1 % % Y/Y GROWTH 11.6 % |
11 1. Non - GAAP financial measures. See slide 17 for definitions and reconciliations to the nearest GAAP measures 2. Adj. EBITDA conversion (%) defined as (Adj. EBITDA – capital expenditure) / Adj. EBITDA ADJ. EBITDA AND FREE CASH FLOW GENERATION $40.6 $53.3 $68.4 2019 2020 2021 ADJ. EBITDA 1 ($MM) ADJ. EBITDA CONVERSION 2 ($MM) $43.7 $58.0 $71.4 2019 2020 2021 Adj. EBITDA Margin 1 10.4% 14.3% 16.7% Adj. EBITDA Conversion 2 93% 92% 96% % CAGR 27.8 % % Y/Y GROWTH 23.1 % % CAGR 29.7 % % Y/Y GROWTH 28.3 % |
12 4Q21 CAPITAL STRUCTURE 1. Non - GAAP financial measures. See slide 17 definitions and reconciliations to the nearest GAAP measures December 31, 2021 (in thousands) Cash and cash equivalents $ 33,857 Debt: Revolver $ — Current portion of long - term debt 13,174 Long - term debt 148,564 Capitalized discount/issuance costs (2,048) Total debt, net $ 159,690 Net debt (Total debt net of cash) $ 125,833 Total debt / Adj. EBITDA (1) 2.2 Net debt / Adj. EBITDA (1) 1.8 Adj. EBITDA (1) $ 71,384 |
13 2022 MANAGEMENT OUTLOOK 2022 GUIDANCE NET SALES $434M to $441M Adj. EBITDA (1) $70.0M to $75.5M Adj. EBITDA Conversion (1) 92% to 95% 1. A non - GAAP financial measure. See slide 17 definitions and reconciliations to the nearest GAAP measures |
14 CONCLUSION 14 Momentous and Record 2021 Strong Tailwinds Driving Demand for Mission Critical Products Focused on Accelerating Growth Both Organically and Through Acquisitions Financial Flexibility to Capitalize on Robust Acquisition Pipeline Strong Free Cash Flow Generation and History of Margin Expansion |
15 APPENDIX |
16 INCOME STATEMENT 16 UNAUDITED (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Net sales $ 103,537 $ 107,623 $ 427,288 $ 404,642 Cost of goods sold 64,342 67,835 256,598 251,704 Gross profit 39,195 39,788 170,690 152,938 Operating expenses Selling, general and administrative 27,794 26,664 114,962 106,627 Restructuring and transaction costs 1,939 2,679 3,430 5,822 Related party expense 142 1,155 579 1,635 Other general expense (income) — — — (10,950) Total operating expenses 29,875 30,498 118,971 103,134 Operating income 9,320 9,290 51,719 49,804 Other expense Interest expense (2,296) (6,113) (16,425) (24,388) Loss on extinguishment of debt — (200) (15,155) (200) Other (expense) income, net (66) 734 (947) 2,659 Total other expense, net (2,362) (5,579) (32,527) (21,929) Income before provision for income taxes 6,958 3,711 19,192 27,875 (Provision) benefit for income taxes (2,670) 12,069 (6,531) 10,578 Net income $ 4,288 $ 15,780 $ 12,661 $ 38,453 Net income per share: Basic $ 0.13 $ 0.57 $ 0.44 $ 1.40 Diluted $ 0.13 $ 0.57 $ 0.44 $ 1.40 Weighted average shares outstanding: Basic 31,908,350 27,483,350 28,598,692 27,483,350 Diluted 31,908,350 27,483,350 28,598,692 27,483,350 |
17 1. Reflects the “Restructuring and transaction costs” line item on our consolidated statement of operations, which for 2021 and 202 0 primarily includes transaction costs composed of legal and consulting fees compared to 2019, which primarily includes termi nat ion benefits and relocation of employees associated with consolidating or closing of facilities. 2. Reflects the “Other general expense (income)” line item on our consolidated statement of operations and includes a gain from a l ong - lived asset sale as well as earn - out stock payments for the year ended December 31, 2020 and a gain from the sale of Mustang in addition to earn - out stock payments for the year ended December 31, 2019. 3. Reflects losses incurred in connection with the August 2021 and November 2020 debt refinances. 4. Reflects the “Other (expense) income, net” line item on our consolidated statement of operations. For the three months and ye ar ended December 31, 2021, other (expense) income, net primarily includes losses on foreign currency transactions. For the thre e m onths and year ended December 31, 2020, other (expense) income, net primarily includes gains on foreign exchange transactions and unrea liz ed gains on an investment in equity securities. For the year ended December 31, 2019, other (expense) income, net primarily i ncl udes unrealized gains on equity securities offset by losses on foreign currency transactions. 5. Reflects a gain on the settlement of contingent consideration. 6. Reflect stock - based compensation expense recognized in the respective periods. 7. Reflects the cost of a cash - based long - term incentive plan awarded to employees that vests over three years. 8. Reflects goodwill impairment expense relating to our Distribution reporting unit. 9. Reflects (Adjusted EBITDA less capital expenditures) / Adjusted EBITDA. 10. Reflects Adjusted EBITDA / Net sales for the relevant periods. 17 (IN THOUSANDS) NON - GAAP RECONCILIATION Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 2019 Net income $ 4,288 $ 15,780 $ 12,661 $ 38,453 $ (1,928) Add back: Depreciation and amortization 3,292 3,526 13,718 14,733 15,443 Interest expense 2,296 6,113 16,425 24,388 29,848 Provision (benefit) for income taxes 2,670 (12,069) 6,531 (10,578) (142) EBITDA $ 12,546 $ 13,350 $ 49,335 $ 66,996 $ 43,221 Add back: Restructuring and transaction costs (1) 1,939 2,679 3,430 5,822 918 Other general expense (income) (2) — — — (10,950) (7,630) Loss on extinguishment of debt (3) — 200 15,155 200 — Other expense (income), net (4) 66 (734) 947 (2,659) (395) Contingent consideration (5) — — — (1,427) — Stock - based compensation expense (6) 355 — 355 — — LTIP bonus (7) 358 — 2,162 — — Goodwill impairment (8) — — — — 7,585 Adjusted EBITDA $ 15,264 $ 15,495 $ 71,384 $ 57,982 $ 43,699 Less: Capital expenditures (804) (795) (3,029) (4,708) (3,082) Adjusted EBITDA less capital expenditures $ 14,460 $ 14,700 $ 68,355 $ 53,274 $ 40,617 Adjusted EBITDA conversion rate (9) 95% 95% 96% 92% 93% Adjusted EBITDA margin (10) 14.7% 14.4% 16.7% 14.3% 10.8% |
18 STATEMENT OF CASH FLOWS 18 UNAUDITED (IN THOUSANDS) Year Ended December 31, 2021 2020 Cash Flows From Operating Activities: Net income $ 12,661 $ 38,453 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,718 14,733 Amortization of original issue discount and debt issue costs 3,193 2,216 Loss on extinguishment of debt 15,155 200 Non - cash consideration received from sale of business — (9,197) Deferred income taxes 4,772 (12,248) Stock - based compensation 355 — Gain on sale of fixed assets — (6,240) Gain on settlement of contingent consideration — (1,427) Loss on settlement of equity securities — 2,288 Provision for losses on accounts receivable (188) 177 Foreign exchange loss (gain) 102 (940) Changes in operating assets and liabilities: Accounts receivable (4,641) 11,811 Inventories (3,189) 1,639 Prepaid expenses and other assets (4,564) 1,837 Accounts payable and other liabilities 2,720 2,117 Net cash provided by operating activities 40,094 45,419 Continued on next slide |
19 STATEMENT OF CASH FLOWS - CONTINUED 19 UNAUDITED (IN THOUSANDS) Year Ended December 31, 2021 2020 Cash Flows From Investing Activities: Purchase of property and equipment (2,832) (4,708) Proceeds from disposition of property and equipment — 12,408 Proceeds from sale of equity securities — 14,372 Payments on settlement of equity securities — (2,288) Net cash (used in) provided by investing activities (2,832) 19,784 Cash Flows From Financing Activities: Proceeds from revolving credit facilities 257,980 382,056 Principal payments on revolving credit facilities (258,612) (384,215) Proceeds from term loans 198,716 219,586 Principal payments on term loans (266,000) (276,444) Proceeds from insurance premium financing 5,010 2,733 Principal payments on insurance premium financing (3,061) (2,897) Payment of capital leases (43) (43) Payment of contingent consideration — (240) Payment of debt modification costs — (5,438) Payments for debt issuance costs (2,198) — Payments on extinguishment of debt (4,217) — Proceeds from initial public offering, net of underwriter discounts 83,421 — Deferred offering cost payments (4,841) — Dividends distributed (12,751) — Net cash used in financing activities (6,596) (64,902) Effect of foreign exchange rates on cash and cash equivalents 318 52 Change in cash and cash equivalents 30,984 353 Cash and cash equivalents, beginning of period 2,873 2,520 Cash and cash equivalents, end of period $ 33,857 $ 2,873 |
20 BALANCE SHEET 20 UNAUDITED (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) December 31, 2021 December 31, 2020 Assets Current assets Cash and cash equivalents $ 33,857 $ 2,873 Accounts receivable, net 48,344 43,646 Inventories 63,978 60,923 Prepaid expenses 10,353 6,665 Other current assets 3,171 3,362 Assets held for sale 278 — Total current assets 159,981 117,469 Property and equipment, net 33,053 35,437 Deferred tax assets, net 7,059 12,900 Intangible assets, net 42,415 51,009 Goodwill 66,262 66,314 Other assets 3,026 150 Total assets $ 311,796 $ 283,279 Liabilities, Mezzanine Equity and Shareholders' Equity Current liabilities Accounts payable $ 19,328 $ 21,978 Accrued liabilities 40,736 36,004 Income tax payable 1,255 1,005 Liabilities held for sale 128 — Current portion of long - term debt 13,174 3,496 Total current liabilities 74,621 62,483 Long - term debt 146,516 209,310 Deferred tax liabilities 1,297 2,085 Other liabilities 722 550 Total liabilities 223,156 274,428 Mezzanine equity Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021 and D ecember 31, 2020) — — Shareholders' equity Common stock ($0.0001 par value, 190,000,000 shares authorized, 34,383,350 shares and 27,483,350 shares issued and outstandin g a s of December 31, 2021 and December 31, 2020, respectively) 3 3 Additional paid - in capital 127,606 48,670 Accumulated other comprehensive loss (1,917) (2,860) Accumulated deficit (37,052) (36,962) Total shareholders’ equity 88,640 8,851 Total liabilities, mezzanine equity and shareholders' equity $ 311,796 $ 283,279 |